<PAGE>
- BT PYRAMID MUTUAL FUNDS -
---------------------------------
BT INVESTMENT LIMITED TERM
U.S. GOVERNMENT SECURITIES FUND
---------------------------------
ANNUAL REPORT
----------------
SEPTEMBER - 1997
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BT INVESTMENT LIMITED TERM U.S. GOVERNMENT SECURITIES FUND
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . .3
BT INVESTMENT LIMITED TERM U.S. GOVERNMENT SECURITIES FUND
Statement of Assets and Liabilities. . . . . . . . . . . . . . . . . . . .5
Statement of Operations. . . . . . . . . . . . . . . . . . . . . . . . . .5
Statement of Changes in Net Assets . . . . . . . . . . . . . . . . . . . .6
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . .8
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . .9
SHORT/INTERMEDIATE U.S. GOVERNMENT SECURITIES PORTFOLIO
Schedule of Portfolio Investments. . . . . . . . . . . . . . . . . . . . 10
Statement of Assets and Liabilities. . . . . . . . . . . . . . . . . . . 11
Statement of Operations. . . . . . . . . . . . . . . . . . . . . . . . . 11
Statement of Changes in Net Assets . . . . . . . . . . . . . . . . . . . 12
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . 13
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . 14
2
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BT INVESTMENT LIMITED TERM U.S. GOVERNMENT SECURITIES FUND
LETTER TO SHAREHOLDERS
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We are pleased to present you with this annual report for the BT Investment
Limited Term U.S. Government Securities Fund, providing a review of the market,
the portfolio, and our outlook, as well as a complete financial summary of the
Fund's operations and a listing of the Portfolio's holdings.
The BT Investment Limited Term U.S. Government Securities Fund (the "Fund")
returned 6.22%* for the twelve months ended September 30, 1997, as compared to
6.88% for the Lehman 1-3 Year Government Obligations Index** and 6.99% for the
Lipper Short/Intermediate U.S. Government Funds Average+. Since its inception
on August 24, 1992, the Fund delivered a total return of 27.79% cumulatively, or
4.92% annualized as of September 30, 1997. For the 5-year period ended
September 30, 1997, the Fund was up 4.74%.
MARKET ACTIVITY
During the Fund's fiscal year, the U.S. Treasury market may best be described as
a roller coaster. It began with a rally as market participants adopted the view
that the U.S. economy was growing at a modest pace and inflation was benign.
Then, as a number of economic statistics signaled accelerating growth and
investors began to anticipate an official rate increase by the Federal Reserve
Board at its March 25th meeting, the overall U.S. Treasury market experienced a
sell off, and yields at the short end of the curve rose. Following the official
rate increase, continued benign inflation and slower growth in the second
calendar quarter put investors' expectations of Federal Reserve Board activity
on hold, and the U.S. Treasury market rallied again. Except for one brief
interruption in early August, the rally continued through the end of the fiscal
year. In fact, when the Producer Price data was released on September 12th and
was much better than market participants had expected, this indication of
continued lack of inflation in the pipeline led the Treasury market to its
second largest one-day rally ever, of 2.48%.
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OBJECTIVE
Seeks high level of current income with the preservation of capital.
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From March 31, 1997 through September 30, 1997, the 2-year Treasury bond yield
dropped 0.63%, and the 5-year Treasury bond yield rallied even more
dramatically, dropping 0.76%. This movement flattened the yield curve,
narrowing the 2 to 5 year spread from 0.34% at March 31 to 0.21% at the Fund's
fiscal year end on September 30.
We believe that the economy is operating at or near full capacity, as indicated
by a falling unemployment rate and a rising capacity utilization rate. While
this environment cannot persist indefinitely, increased productivity, dampened
wage pressures, and deficiency in pricing power may be mitigating factors that
help explain the lack of apparent inflation pressures. Other factors may also
be supporting the Treasury market. For example, real yields have remained
relatively constant during the last few months of the fiscal year, while
inflation expectations have declined, which has helped to reduce nominal yields.
Further, with the U.S. Treasury deficit in a cyclical downtrend, the prospect of
a significant decrease in Treasury supply going forward is giving the market a
technical lift.
INVESTMENT REVIEW
The Fund underperformed its benchmark and its category average for the annual
period. This underperformance can be attributed almost exclusively to the
second half of the Fund's fiscal year, when our duration positioning was shorter
than the benchmark in anticipation of further Federal Reserve Board action. We
believed that if economic activity were reignited, and wage pressures or other
signs of incipient inflation were released, it would likely prompt the Fed to
move in August or September. However, the Federal Reserve Board remained on
hold, with no change in monetary policy at the August or September meetings, and
interest rates, in fact, went down.
Given this outlook, we moved from a neutral duration of 1.75 years at the start
of the fiscal year to a duration of 1.46 years at the end of March and stayed in
a somewhat defensive posture for most of the second half of the year. As a
result, the Fund did not benefit fully from the market's rally during this
period. However, once we saw that the Fed was not tightening monetary policy
again, we lengthened duration to a neutral stance again toward the end of the
third calendar quarter, and the Fund did benefit from this yield curve
positioning, biased for a flatter curve. On September 30, 1997, the Fund had a
duration of 1.68 years.
MANAGER OUTLOOK
Looking ahead, we continue to believe that it will be difficult to sustain the
pace of economic growth we have seen over the past four quarters, without some
resulting pickup in inflation. Barring some sign of further pressures in the
system, however, it seems unlikely that the Fed will raise rates again this
calendar year. The extremely benign employment release in early October
supports this outlook. Still, we believe that the Fed will continue to be
proactive in its conduct of monetary policy, so we plan to take note of early
warning signs of mounting pressures in the economy, and manage the Fund to
capitalize on this through our discretionary interest rate positioning. As
inflation picks up, interest rates are expected to follow, although not to the
degree that had been feared earlier.
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INVESTMENT INSTRUMENTS
Direct obligations issued or guaranteed by the U.S. Government or its agencies
and instrumentalities, including repurchase agreements collateralized by U.S.
Government obligations. The average weighted maturity of securities will range
from two to five years.
- --------------------------------------------------------------------------------
We intend to maintain a neutral to slightly longer than the benchmark stance for
the near term but to look for an opportunity to move shorter once again should
we see early indicators of inflation and rising interest rates.
* Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
** The Lehman 1-3 Year Government Obligations Index represents Agency and
Treasury securities with maturities of 1-3 years. Indexes are unmanaged,
and investments cannot be made in an index.
+ Lipper figures represent the average of the total returns reported by all
of the mutual funds designated by Lipper Analytical Services, Inc. as
falling into the respective categories indicated. These figures do not
reflect sales charges.
3
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BT INVESTMENT LIMITED TERM U.S. GOVERNMENT SECURITIES FUND
LETTER TO SHAREHOLDERS
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DIVERSIFICATION OF PORTFOLIO INVESTMENTS
By Asset Type as of September 30, 1997
(PERCENTAGES ARE BASED ON MARKET VALUE)
[PIE CHART]
U.S. Treasury Notes 93%
Repurchase Agreement 7%
We will also, of course, maintain our long-term perspective for the Fund, as we
seek to provide high levels of current income with the preservation of capital.
We value your ongoing support of the BT Investment Limited Term U.S. Government
Securities Fund and look forward to serving your investment needs in the years
ahead.
/s/ Louis Hudson
Louis Hudson
Portfolio Manager of the
Short/Intermediate U.S. Government Securities Portfolio
September 30, 1997
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PERFORMANCE COMPARISON
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COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE BT INVESTMENT
LIMITED TERM U.S. GOVERNMENT SECURITIES FUND AND THE LEHMAN 1-3 YEAR GOVT. BOND
INDEX AS OF AUGUST 31, 1992.
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TOTAL RETURN FOR THE PERIOD
ENDED SEPTEMBER 30, 1997
One year Since 8/24/92*
6.22% 4.92%**
* The Fund's inception date.
** Annualized.
Investment return and principal value may fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
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[GRAPH]
BT Investment Limited Lehman 1-3
Term U.S. Govt. Securities Year Govt.
Fund - $12,743 Bond Index - $13,090
-------------------------- --------------------
Aug-92 10000 10000
Sep-92 10111 10094
Dec-92 10044 10115
Mar-93 10310 10333
Jun-93 10404 10448
Sep-93 10613 10592
Dec-93 10666 10659
Mar-94 10597 10607
Jun-94 10614 10607
Sep-94 10630 10714
Dec-94 10659 10714
Mar-95 10958 11070
Jun-95 11307 11421
Sep-95 11440 11591
Dec-95 11704 11876
Mar-96 11742 11921
Jun-96 11846 12046
Sep-96 11996 12247
Dec-96 12224 12479
Mar-97 12273 12559
Jun-97 12556 12838
Sep-97 12743 13090
Past performance is not indicative of future performance.
4
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BT INVESTMENT LIMITED TERM U.S. GOVERNMENT SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 1997
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<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investment in Short/Intermediate U.S. Government Securities Portfolio, at Value. . . . . . . . . . . . . . . . . . $57,160,106
Receivable for Shares of Beneficial Interest Subscribed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,057
Prepaid Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,738
-----------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,174,901
-----------
LIABILITIES
Due to Bankers Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,337
Payable for Shares of Beneficial Interest Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,719
Dividends Payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,539
Accrued Expenses and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,438
-----------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,033
-----------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $57,105,868
-----------
-----------
COMPOSITION OF NET ASSETS
Paid-in Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $56,910,643
Accumulated Net Realized Loss from Investment Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . (307,921)
Net Unrealized Appreciation on Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503,146
-----------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $57,105,868
-----------
-----------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE (net assets divided by shares outstanding). . . . . . . . . $ 9.86
-----------
SHARES OUTSTANDING ($0.001 par value per share, unlimited number of shares of beneficial interest authorized). . . . 5,790,160
-----------
-----------
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STATEMENT OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income Allocated from Short/Intermediate U.S. Government Securities Portfolio, net . . . . . . . . . . . . . . . . $ 3,093,324
-----------
EXPENSES
Administration and Services Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161,604
Registration Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,206
Printing and Shareholder Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000
Professional Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,745
Trustees Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,140
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,421
-----------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221,116
Less Expenses Absorbed by Bankers Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (59,512)
Net Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161,604
NET INVESTMENT INCOME. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,931,720
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net Realized Gain from Investment Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,150
Net Change in Unrealized Appreciation on Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236,751
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371,901
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,303,621
-----------
-----------
See Notes to Financial Statements on Page 8
</TABLE>
5
<PAGE>
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BT INVESTMENT LIMITED TERM U.S. GOVERNMENT SECURITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
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<TABLE>
<CAPTION>
FOR THE FOR THE PERIOD
YEAR ENDED JANUARY 1, 1996 TO
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996*
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net Investment Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 2,931,720 $ 1,515,597
Net Realized Gain (Loss) from Investment Transactions. . . . . . . . . . . . . . . . . . 135,150 (405,643)
Net Change in Unrealized Appreciation on Investments . . . . . . . . . . . . . . . . . . 236,751 23,331
------------------ ------------------
Net Increase in Net Assets from Operations . . . . . . . . . . . . . . . . . . . . . . . . 3,303,621 1,133,285
------------------ ------------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,931,720) (1,515,597)
Net Realized Gain from Investment Transactions . . . . . . . . . . . . . . . . . . . . . -- (113,083)
------------------ ------------------
TOTAL DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,931,720) (1,628,680)
------------------ ------------------
CAPITAL TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (NOTE 3)
Net Proceeds from Shares Issued in Merger Transactions . . . . . . . . . . . . . . . . . -- 26,715,127
Net Increase (Decrease) from Capital Transactions in Shares of Beneficial Interest . . . 4,997,304 (4,352,961)
------------------ ------------------
Net Increase from Capital Transactions in Shares of Beneficial Interest. . . . . . . . . . 4,997,304 22,362,166
------------------ ------------------
TOTAL INCREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,369,205 21,866,771
NET ASSETS
Beginning of Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,736,663 29,869,892
------------------ ------------------
End of Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 57,105,868 $ 51,736,663
------------------ ------------------
------------------ ------------------
</TABLE>
* On February 9, 1996, the Board of Trustees approved the change of the Fund's
fiscal year end from December 31 to September 30.
See Notes to Financial Statements on Page 8
6
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BT INVESTMENT LIMITED TERM U.S. GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below are selected data for a share outstanding, total investment
return, other supplemental data and ratios to average net assets for the periods
indicated for the BT Investment Limited Term U.S. Government Securities Fund.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
FOR THE FOR THE PERIOD DECEMBER 31,
YEAR ENDED JANUARY 1, 1996 TO -------------------------------
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996* 1995 1994 1993
------------------ ------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD . . . . . . . . $9.80 $9.96 $9.61 $10.06 $9.93
----- ----- ----- ------ -----
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income. . . . . . . . . . . . . . . 0.53 0.38 0.57 0.44 0.41
Net Realized and Unrealized Gain (Loss) from
Investment Transactions. . . . . . . . . . . . . . 0.06 (0.14) 0.35 (0.45) 0.20
----- ----- ----- ------ -----
Total Income (Loss) from Investment Operations . . . 0.59 0.24 0.92 (0.01) 0.61
----- ----- ----- ------ -----
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income. . . . . . . . . . . . . . . (0.53) (0.38) (0.57) (0.44) (0.41)
Net Realized Gain from Investment Transactions . . -- (0.02) -- -- (0.07)
----- ----- ----- ------ -----
Total Distributions. . . . . . . . . . . . . . . . . (0.53) (0.40) (0.57) (0.44) (0.48)
----- ----- ----- ------ -----
NET ASSET VALUE, END OF PERIOD . . . . . . . . . . . $9.86 $9.80 $9.96 $9.61 $10.06
----- ----- ----- ------ -----
----- ----- ----- ------ -----
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . 6.22% 2.50% 9.81% (0.08)% 6.21%
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Period (000s omitted) . . . . . $57,106 $51,737 $29,870 $31,302 $3,462
Ratios to Average Net Assets:
Net Investment Income. . . . . . . . . . . . . . 5.44% 5.22%** 5.81% 4.69% 4.35%
Expenses, Including Expenses of the Short/
Intermediate U.S. Government Securities
Portfolio . . . . . . . . . . . . . . . . . . 0.60% 0.60%** 0.60% 0.60% 0.60%
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses by
Bankers Trust . . . . . . . . . . . . . . . . 0.15% 0.40%** 0.24% 0.34% 1.43%
</TABLE>
------------------
* On February 9, 1996, the Board of Trustees approved the change of the
Fund's fiscal year end from December 31 to September 30.
** Annualized
See Notes to Financial Statements on Page 8
7
<PAGE>
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BT INVESTMENT LIMITED TERM U.S. GOVERNMENT SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
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NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION
BT Pyramid Mutual Funds (the "Trust") is registered under the Investment Company
Act of 1940 (the "Act"), as amended, as an open-end management investment
company. The Trust was organized on February 28, 1992, as a business trust under
the laws of the Commonwealth of Massachusetts. The BT Investment Limited Term
U.S. Government Securities Fund (the "Fund") is one of the funds offered to
investors by the Trust. The Fund commenced operations and began offering shares
of beneficial interest on August 24, 1992. The Fund invests substantially all of
its assets in the Short/Intermediate U.S. Government Securities Portfolio (the
"Portfolio"). The Portfolio is an open-end management investment company
registered under the Act. The Fund seeks to achieve its investment objective by
investing all of its investable assets in the Portfolio. The value of such
investment in the Portfolio reflects the Fund's proportionate interest in the
net assets of the Portfolio. At September 30, 1997, the Fund's investment was
approximately 100% of the Portfolio.
The financial statements of the Portfolio, including the Schedule of Portfolio
Investments, are contained elsewhere in this report.
B. INVESTMENT INCOME
The Fund earns income, net of expenses, daily on its investment in the
Portfolio. All of the net investment income and realized and unrealized gains
and losses from the security transactions of the Portfolio are allocated pro
rata among the investors in the Portfolio at the time of such determination.
C. DIVIDENDS
The Fund declares dividends daily and pays these dividends monthly from net
investment income. Dividends payable to shareholders are recorded by the Fund on
the ex-dividend date. Distributions of net realized short-term and long-term
capital gains, if any, will be made annually.
D. FEDERAL INCOME TAXES
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to shareholders. Therefore, no federal
income tax provision is required. The Fund may periodically make
reclassifications among certain of its capital accounts as a result of the
timing and characterization of certain income and capital gains distributions
determined annually in accordance with federal tax regulations which may differ
from generally accepted accounting principles. For the year ended September 30,
1997, $124,047 of net realized loss was reclassified from accumulated net
realized loss to paid-in-capital.
For the year ended September 30, 1997, the Fund has a capital loss carry forward
of $302,939 of which expires in 2004.
E. OTHER
The Trust accounts separately for the assets, liabilities and operations of the
Fund. Expenses directly attributable to the Fund are charged to that Fund, while
expenses which are attributable to all of the Trust's funds are allocated among
them.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements. Actual results could
differ from those estimates.
NOTE 2--FEES AND TRANSACTIONS WITH AFFILIATES
The Fund has entered into an Administration and Services Agreement with Bankers
Trust Company ("Bankers Trust"). Under this Administration and Services
Agreement, Bankers Trust provides administrative, custody, transfer agency and
shareholder services to the Fund in return for a fee computed daily and paid
monthly at an annual rate of 0.30 of 1% of the Fund's average daily net assets.
For the year ended September 30, 1997, this fee aggregated $161,604.
The Trust has entered into a Distribution Agreement with Edgewood Services, Inc.
("Edgewood"). Under the Distribution Agreement with the Trust, pursuant to Rule
12b-1 of the Act, Edgewood may seek reimbursement, at an annual rate not
exceeding 0.20 of 1% of the Fund's average daily net assets, for expenses
incurred in connection with any activities primarily intended to result in the
sale of the Fund's shares. For the year ended September 30, 1997, there were no
reimbursable expenses incurred under this agreement.
Bankers Trust has voluntarily undertaken to waive and reimburse expenses of the
Fund, to the extent necessary, to limit all expenses to 0.30 of 1% of the
average daily net assets of the Fund, excluding expenses of the Portfolio and
0.60 of 1% of the average daily net assets of the Fund, including expenses of
the Portfolio. For the year ended September 30, 1997, expenses of the Fund have
been reduced by $59,512.
Certain trustees and officers of the Fund are also directors, officers and/or
employees of Edgewood. None of the trustees so affiliated received compensation
for services as trustee of the Fund. Similarly, none of the Fund's officers
received compensation from the Fund.
NOTE 3--SHARES OF BENEFICIAL INTEREST
At September 30, 1997, there were an unlimited number of shares of beneficial
interest authorized. Transactions in shares of beneficial interest were as
follows:
FOR THE FOR THE PERIOD
YEAR ENDED JANUARY 1, 1996 TO
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996**
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
Sold* 2,309,983 $22,661,137 3,817,849 $37,544,648
Reinvested 287,967 2,832,604 162,886 1,602,240
Redeemed (2,085,611) (20,496,437) (1,703,203) (16,784,722)
--------- ----------- --------- -----------
Net Increase 512,339 $ 4,997,304 2,277,532 $22,362,166
--------- ----------- --------- -----------
--------- ----------- --------- -----------
- --------------
* On June 5, 1996, the BT Investment Limited Term U.S. Government Securities
Fund acquired the assets of BT Investment Short/Intermediate U.S.
Government Securities Fund in exchange for 2,720,481 shares of beneficial
interest at the net asset value of $9.82 per share amounting to
$26,715,127.
** On February 9, 1996, the Board of Trustees approved the change of the
Fund's fiscal year end from December 31 to September 30.
8
<PAGE>
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BT INVESTMENT LIMITED TERM U.S. GOVERNMENT SECURITIES FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees and Shareholders of BT Pyramid Mutual Funds:
We have audited the accompanying statement of assets and liabilities of the BT
Investment Limited Term U.S. Government Securities Fund (one of the Funds
comprising BT Pyramid Mutual Funds) as of September 30, 1997, and the related
statement of operations for the year then ended, the statement of changes in
net assets for the year then ended and the nine month period ended September 30,
1996 and the financial highlights for the year ended September 30, 1997, the
period January 1, 1996 to September 30, 1996 and the years ended December 31,
1995, 1994 and 1993. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1997 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the BT
Investment Limited Term U.S. Government Securities Fund of BT Pyramid Mutual
Funds as of September 30, 1997, the results of its operations for the year then
ended, the changes in its net assets for the year ended September 30, 1997 and
the nine month period ended September 30, 1996, and the financial highlights for
the periods referred to above, in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
Kansas City, Missouri
November 5, 1997
9
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SHORT/INTERMEDIATE U.S. GOVERNMENT SECURITIES PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
Principal
Amount Description Value
------ ----------- -----
U.S. GOVERNMENT & AGENCY
OBLIGATIONS - 92.79%
U.S. TREASURY NOTES - 92.79%
$ 9,370,000 6.00%, 9/30/98. . . . . . . . . . . . . . . . $ 9,402,199
10,740,000 5.00%, 1/31/99. . . . . . . . . . . . . . . . 10,639,326
19,530,000 5.875%, 8/31/99 . . . . . . . . . . . . . . . 19,548,285
11,600,000 6.00%, 8/15/00. . . . . . . . . . . . . . . . 11,639,860
1,820,000 5.875%, 9/30/02 . . . . . . . . . . . . . . . 1,810,329
------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Cost $52,849,115) . . . . . . . . . . . . . . . . . . . . . 53,039,999
------------
Principal
Amount Description Value
------ ----------- -----
SHORT-TERM INSTRUMENT - 6.78%
REPURCHASE AGREEMENT - 6.78%
$3,872,212 Repurchase Agreement with Sanwa Bank, dated
9/30/97, 6.02%. Principal and Interest in
the Amount of $3,872,860, due 10/01/97.
(Collateralized by U.S. Treasury Notes, Par
Value $3,924,000, 5.00% due 1/31/98, Value
of $3,951,617) (Cost $3,872,212) . . . . . $ 3,872,212
------------
TOTAL INVESTMENTS (Cost $56,721,327) . . . . . . . . 99.57% 56,912,211
Other Assets in Excess of Liabilities. . . . . . . . 0.43% 248,026
------- ------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . 100.00% $ 57,160,237
------- ------------
------- ------------
See Notes to Financial Statements on Page 13
10
<PAGE>
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SHORT/INTERMEDIATE U.S. GOVERNMENT SECURITIES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
ASSETS
Investments, at Value (Cost of $56,721,327). . . . . . . . . $56,912,211
Interest Receivable and Other. . . . . . . . . . . . . . . . 272,299
-----------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . 57,184,510
-----------
LIABILITIES
Due to Bankers Trust . . . . . . . . . . . . . . . . . . . . 13,438
Accrued Expenses and Other . . . . . . . . . . . . . . . . . 10,835
-----------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . 24,273
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . $57,160,237
-----------
COMPOSITION OF NET ASSETS
Paid-in Capital. . . . . . . . . . . . . . . . . . . . . . . $56,969,353
Net Unrealized Appreciation on Investments . . . . . . . . . 190,884
-----------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . $57,160,237
-----------
-----------
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,255,411
EXPENSES
Advisory Fees. . . . . . . . . . . . . . . . . . . . . . . . 135,067
Administration and Services Fees . . . . . . . . . . . . . . 27,013
Professional Fees. . . . . . . . . . . . . . . . . . . . . . 20,677
Trustees Fees. . . . . . . . . . . . . . . . . . . . . . . . 2,100
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . 184,857
Less Expenses Absorbed by Bankers Trust. . . . . . . . . . . (22,777)
Net Expenses . . . . . . . . . . . . . . . . . . . . . . . 162,080
NET INVESTMENT INCOME. . . . . . . . . . . . . . . . . . . . . 3,093,331
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net Realized Gain from Investment Transactions . . . . . . . 135,146
Net Change in Unrealized Appreciation on Investments . . . . 236,751
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS. . . . . . . . 371,897
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS . . . . . . . . . . $ 3,465,228
-----------
-----------
See Notes to Financial Statements on Page 13
11
<PAGE>
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SHORT/INTERMEDIATE U.S. GOVERNMENT SECURITIES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE PERIOD
YEAR ENDED JANUARY 1, 1996 TO
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996*
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net Investment Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,093,331 $ 2,201,579
Net Realized Gain (Loss) from Investment Transactions. . . . . . . . . . . . . . . . . . 135,146 (543,943)
Net Change in Unrealized Appreciation (Depreciation) on Investments. . . . . . . . . . . 236,751 (220,154)
------------------ ------------------
Net Increase in Net Assets from Operations . . . . . . . . . . . . . . . . . . . . . . . . 3,465,228 1,437,482
------------------ ------------------
CAPITAL TRANSACTIONS
Proceeds from Capital Invested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,970,677 46,130,920
Value of Capital Withdrawn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23,499,793) (50,522,190)
------------------ ------------------
Net Increase (Decrease) in Net Assets from Capital Transactions. . . . . . . . . . . . . . 1,470,884 (4,391,270)
------------------ ------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 4,936,112 (2,953,788)
NET ASSETS
Beginning of Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,224,125 55,177,913
------------------ ------------------
End of Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 57,160,237 $ 52,224,125
------------------ ------------------
------------------ ------------------
</TABLE>
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FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below are selected supplemental data and ratios to average net assets
for the periods indicated for the Short/Intermediate U.S. Government Securities
Portfolio.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
FOR THE FOR THE PERIOD DECEMBER 31,
YEAR ENDED JANUARY 1, 1996 TO ------------------------------
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996* 1995 1994 1993
------------------ ------------------ ---- ---- ----
<S> <C> <C> <C> <C> <C>
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Period (000s omitted) . $57,160 $52,224 $55,178 $47,721 $17,729
Ratios to Average Net Assets:
Net Investment Income . . . . . . . . . . 5.73% 5.46%** 6.09% 4.91% 4.25%
Expenses. . . . . . . . . . . . . . . . . 0.30% 0.30%** 0.30% 0.30% 0.30%
Decrease Reflected in Above Expense
Ratio Due to Absorption of Expenses by
Bankers Trust . . . . . . . . . . . . . 0.04% 0.05%** 0.05% 0.09% 0.25%
Portfolio Turnover Rate. . . . . . . . . . 383% 314% 246% 202% 267%
</TABLE>
- ------------
* On February 9,1996, the board of Trustees approved the change of the
Portfolio's fiscal year end from December 31 to September 30.
** Annualized
See Notes to Financial Statements on Page 13
12
<PAGE>
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SHORT/INTERMEDIATE U.S. GOVERNMENT SECURITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1--ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION
The Short/Intermediate U.S. Government Securities Portfolio (the "Portfolio") is
registered under the Investment Company Act of 1940 (the "Act"), as amended, as
an open-end management investment company. The Portfolio was organized on
December 11, 1991 as an unincorporated trust under the laws of New York and
commenced operations on August 24, 1992. The Declaration of Trust permits the
Board of Trustees (the "Trustees") to issue beneficial interests in the
Portfolio.
B. SECURITY VALUATION
The Portfolio's investments are carried at fair market value as determined by an
independent pricing service at the end of each business day. Short-term
obligations with remaining maturities of 60 days or less are valued at amortized
cost which, with accrued interest, approximates value. Securities for which
quotations are not available are stated at fair value as determined in good
faith under procedures established by and under the general supervision of the
Board of Trustees.
C. SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on a trade date basis. Interest income
is recorded on the accrual basis and includes amortization of premium and
accretion of discount on investments. Realized gains and losses from securities
transactions are recorded on the identified cost basis.
All of the net investment income and realized and unrealized gains and losses
from the securities transactions of the Portfolio are allocated pro rata based
on ownership percentage among the investors in the Portfolio at the time of such
determination.
D. REPURCHASE AGREEMENTS
The Portfolio may enter into repurchase agreements with financial institutions
deemed to be creditworthy by the Portfolio's Investment Adviser, subject to the
seller's agreement to repurchase such securities at a mutually agreed upon
price. Securities purchased subject to repurchase agreements are deposited with
the Portfolio's custodian and pursuant to the terms of the repurchase agreement
must have an aggregate market value greater than or equal to the repurchase
price plus accrued interest at all times. If the value of the underlying
securities falls below the value of the repurchase price plus accrued interest,
the Portfolio will require the seller to deposit additional collateral by the
next business day. If the request for additional collateral is not met, or the
seller defaults on its repurchase obligation, the Portfolio maintains the right
to sell the underlying securities at market value and may claim any resulting
loss against the seller. However, in the event of default or bankruptcy by the
seller, realization and/or retention of the collateral may be subject to legal
proceedings.
E. FEDERAL INCOME TAXES
It is the Portfolio's policy to comply with the requirements of the Internal
Revenue Code. Therefore, no federal income tax provision is required.
F. OTHER
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts in the financial statements. Actual results could
differ from those estimates.
NOTE 2--FEES AND TRANSACTIONS WITH AFFILIATES
The Portfolio has entered into an Administration and Services Agreement with
Bankers Trust Company ("Bankers Trust"). Under this Administration and Services
Agreement, Bankers Trust provides administrative, custody, transfer agency and
shareholder services to the Portfolio in return for a fee computed daily and
paid monthly at an annual rate of 0.05 of 1% of the Portfolio's average daily
net assets. For the year ended September 30, 1997, this fee aggregated $27,013.
The Portfolio has entered into an Advisory Agreement with Bankers Trust. Under
this Advisory Agreement, the Portfolio pays Bankers Trust an advisory fee
computed daily and paid monthly at an annual rate of 0.25 of 1% of the
Portfolio's average daily net assets. For the year ended September 30, 1997,
this fee aggregated $135,067.
Bankers Trust has voluntarily undertaken to waive and reimburse expenses of the
Portfolio to the extent necessary, to limit all expenses to 0.30 of 1% of the
average daily net assets of the Portfolio. For the year ended September 30,
1997, expenses of the Portfolio have been reduced by $22,777.
Certain trustees and officers of the Portfolio are also directors, officers
and/or employees of Edgewood Services, Inc. None of the trustees so affiliated
received compensation for services as trustee of the Portfolio. Similarly, none
of the Portfolio's officers received compensation from the Portfolio.
NOTE 3--PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments of
long-term U.S. Government obligations for the year ended September 30, 1997 were
$190,333,114 and $185,189,515, respectively.
For federal income tax purposes, the tax basis of investments held at September
30, 1997 was $56,726,308. The aggregate gross unrealized appreciation for all
investments was $187,771 and the aggregate gross unrealized depreciation for all
investments was $1,868.
13
<PAGE>
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SHORT/INTERMEDIATE U.S. GOVERNMENT SECURITIES PORTFOLIO
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees and Holders of Beneficial Interest of the Short/Intermediate
U.S. Government Securities Portfolio:
We have audited the accompanying statement of assets and liabilities, including
the schedule of portfolio investments, of the Short/Intermediate U.S. Government
Securities Portfolio as of September 30, 1997, and the related statement of
operations for the year then ended, the statement of changes in net assets for
the year then ended and the nine month period ended September 30, 1996 and the
financial highlights for the year ended September 30, 1997, the period January
1, 1996 to September 30, 1996 and the years ended December 31, 1995, 1994 and
1993. These financial statements and financial highlights are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1997 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Short/Intermediate U.S. Government Securities Portfolio as of September 30,
1997, the results of its operations for the year then ended, the changes in its
net assets for the year ended September 30, 1997 and the nine month period ended
September 30, 1996, and the financial highlights for the periods referred to
above, in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Kansas City, Missouri
November 5, 1997
14
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15
<PAGE>
BT PYRAMID MUTUAL FUNDS
BT INVESTMENT LIMITED TERM U.S. GOVERNMENT SECURITIES
INVESTMENT ADVISER OF THE PORTFOLIO AND ADMINISTRATOR
BANKERS TRUST COMPANY
130 Liberty Street
New York, NY 10006
DISTRIBUTOR
EDGEWOOD SERVICES, INC.
Clearing Operations
P.O. Box 897
Pittsburgh, PA 15230-0897
CUSTODIAN AND TRANSFER AGENT
BANKERS TRUST COMPANY
130 Liberty Street
New York, NY 10006
INDEPENDENT ACCOUNTANTS
COOPERS & LYBRAND L.L.P.
1100 Main Street, Suite 900
Kansas City, MO 64105
COUNSEL
WILLKIE FARR & GALLAGHER
153 East 53rd Street
New York, NY 10022
For information on how to invest, shareholder account information and current
price and yield information, please contact your relationship manager or the BT
Mutual Fund Service Center at (800) 730-1313.
